ABSTRA

CT

Motives for internationalization

Small companies in Swedish incubators and science parks

Master Thesis
Department of business studies
Uppsala University, 2007-01-18

Supervisor: Rian Drogendijk

Authors: Anders Hansson

Kim Hedin
ABSTRACT

In this paper we investigate small and young companies motives for

internationalization. There are many reasons for companies to engage in foreign
direct investment. This study is based on theories including four categories of
internationalization drivers that motivate firms to establish themselves abroad.
Theses categories consist of market, resource, efficiency, and strategic resources
seeking motives. A fifth category was added in order to include network seeking
motives.

The survey was conducted using a web based questionnaire. The target
population consisted of companies that are members of nine Swedish business
incubators and science parks. E-mails were sent to representatives in the
incubators and science parks and were then forwarded to the companies, asking
them to participate in the study.

We conclude that the member companies of Swedish incubators and science

parks responded most positively to network and market seeking motives. We
therefore regard the companies as network seekers and market seekers. Four
motives were by the responders associated with the highest degree of
importance. Two were in the category of network seeking motives: starting new
collaborations and staying close to main client or supplier. The other two were in
the category of market seeking motives: reaching new markets and limitations of
the home market.

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CONTENTS

1 INTRODUCTION.................................................................................1
2 THEORETICAL FRAMEWORK ..............................................................4
2.1 FOREIGN DIRECT INVESTMENT ..............................................................4
2.2 MOTIVES .......................................................................................5
2.2.1 Market seekers ......................................................................6
2.2.2 Resource seekers ...................................................................7
2.2.3 Efficiency seekers...................................................................7
2.2.4 Strategic resource seekers ......................................................8
2.2.5 Network seekers ....................................................................9
2.3 CONCLUDING THE MOTIVES ................................................................ 11
3 HOW THE SURVEY WAS CONDUCTED...............................................12
3.1 A QUANTITATIVE APPROACH ............................................................... 12
3.2 CHOOSING THE COMPANIES................................................................ 12
3.2.1 Incubators and Science Parks ................................................ 13
3.3 COLLECTING DATA USING A QUESTIONNAIRE ............................................ 14
3.4 CONSTRUCTION OF THE QUESTIONNAIRE ................................................. 16
3.4.1 Section 1 control variables (questions 1 to 4) ........................ 17
3.4.2 Section 2 motives of internationalization (question 5) ............. 17
3.4.3 Section 3 free text area (question 6) .................................... 18
3.4.4 Section 4 e-mail (question 7) .............................................. 18
3.5 IS THE SURVEY VALID AND RELIABLE? .................................................... 18
3.6 ANALYZING THE DATA ...................................................................... 19
4 RESULTS FROM THE QUESTIONNAIRE .............................................21
4.1 CONTROL VARIABLES ....................................................................... 21
4.2 SINGLE MOTIVES ............................................................................ 21
4.3 GROUPS OF MOTIVES ....................................................................... 23
4.4 ADDITIONAL MOTIVES AND TAKING PART IN THE FINAL REPORT ....................... 25
5 INTERPRETATION AND DISCUSSION ..............................................26
6 CONCLUSIONS.................................................................................29
6.1 LIMITATIONS ................................................................................ 29
6.2 WHO MAY BENEFIT FROM THIS STUDY? ................................................... 30
6.3 FUTURE RESEARCH .......................................................................... 30
7 REFERENCES ...................................................................................32
APPENDIX A QUESTIONNAIRE ............................................................36
APPENDIX B PRECEDING LETTER ........................................................40
APPENDIX C PARTICIPATING INCUBATORS AND SCIENCE PARKS ......41
APPENDIX D RESPONSES ....................................................................42

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1 INTRODUCTION

Today, many companies take the step to establish themselves abroad. The
motives for internationalization are many. Perhaps the home market is saturated,
presence in a certain country grants access to strategic resources or there are
cluster effects to be explored in a specific region. The decision makers of the
companies that are becoming international have different experience, are in
different situations and consider different motives before taking the step into the
international market.

Most companies start operations domestically with value adding activities

conducted within the borders of the home country only. Becoming a multinational
company requires a change of view and mind set (Bjrkman, 1990).

As small and medium sized enterprises (SMEs) are developing their role on the
global market, researchers are increasingly interested in the knowledge transfer
and management skills of these companies (Zahra, 2005). Oviatt and McDougall
(2005) explain how new ventures with unique value adding resources can enter
the global markets even with constrained finances. Today there is limited
information available about how prior conditions affect internationalization
decisions. Such information would be useful for developing future theories about
new international ventures and their success on the global arena (Zahra, 2005).

Newly internationalized firms face difficulties and most fail or achieve low levels
of success. Hollenstein (2005) as well as Karagozoglu and Lindell (1998) claim
that small firms usually have less financial resources and international experience
compared to larger firms. This means that internationalization is even more
problematic for SMEs in the case of extensive international investment and
commitment (Yip, Biscarri, & Monti, 2000). Despite scarce resources, young firms
therefore use a mix of strategies that allow success in diverse international
markets (Knight and Cavusgil, 2004). One way of overcoming financial
constraints is to engage in alliances with other firms internationally, for example
involving collaborations with suppliers, distributors and joint-venture partners

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(Chen & Huang, 2004). Buckley (1989) argues that smaller companies are also in
a different situation because of limited managerial experience. However,
Karagozoglu & Lindell (1998) tell us that small firms do have some advantages
when it comes to speed and flexibility on the market compared with larger firms.
For example, small firms are usually more flexible than large firms when it comes
to establishing a position in a highly internationalized network. Moreover,
because of limited managerial experience, foreign direct investment (FDI) made
by small companies is concentrated on developed countries (Masataka 1995).

Buckley (1989) also identified several key areas in which small firms are different
and these differences could be both constraints as well as advantages. The focus
on minimizing capital outlay sometimes leads to less than optimal consequences.
In raising capital, the small firm faces problems of how to search for and raise
capital without disclosing its competitive advantage secrets. The shortage of
skilled management in smaller firms is also a serious liability. Small firms do not
often have specialist executives to manage their international operations, nor do
they possess a hierarchy of managers through which complex decisions can be
passed.

In addition, Freeman, Edwards, & Schroder (2006) identified lack of economies of

scale, lack of resources (financial and knowledge), and aversion to risk taking as
key constraints for smaller, newly internationalized, firms. Buckley (1989)
however argued that owner-managers of such companies may very well greater
risk takers than other types of decision makers. He also explained how there are
two significant types of relationship between firm size and market size. In the
first case we have a small firm attempting to grow in an industry where optimal
scale is large in relation to market size. Secondly, there are many industries with
few economies of scale where many small firms exist. Small firms can fill the role
of a niche player in the market which could be a major advantage. However, in
the first case, it is difficult for a small firm to grow in competition with large
firms. In such situations, the vulnerability of small firms and the danger of
becoming overstretched often lead to bankruptcy or selling out.

International new ventures are described by Oviatt and McDougall (2005) as

business organizations that seek to obtain a significant competitive advantage
from the use of resources and the sale of outputs in multiple countries. These

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start-ups often demonstrate significant and observable commitment of resources
(material, people, financing, time) in more than one nation.

Though small or start up companies to some extent are in an exposed position,

they may get valuable support by accessing a business incubator or become a
member of a science park. Incubators and Science Parks are becoming a
common phenomenon in our society. Still, not many people know about their
existence. Incubators support the process of developing people, business and
companies. The entrepreneurs of the companies in the incubators receive tailored
management assistance, financial, technological and commercial networks. They
also get a chance to benefit from a business growth environment involving office
services. The concept of business incubators originated from the USA in the
1950s. The reason was to support entrepreneurs from universities. The first
incubators in Sweden were established in the 1970s. Today, many international
universities have incubators as a natural part of their activities to give structure
and credibility for new ideas and companies. The incubator process strives to
stimulate the growth of new companies and can be seen as the link between
entrepreneurs and the commercial market. (SISP, 2006a)

There is a need for better understanding of possibilities associated with business

relationships in smaller firms and how networks are used to achieve early and
rapid internationalization (Freeman et al., 2006). With this paper, we hope to
learn about small and young companies drives for becoming international. We
believe that it will be of benefit for the business incubators and science parks
when assisting their members.

In this paper we investigate the motives for FDI for small and young companies
in Swedish incubators and science parks.

The term internationalization can be interpreted in several ways, like increased

exports and imports, improved individual mobility across borders, or mixing
different cultures and languages. In this paper, we see FDI as the means for
internationalization, because becoming a multinational enterprise requires a
strong commitment and investment abroad.

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2 THEORETICAL FRAMEWORK

In this chapter the reader is introduced to the theories and terms related to
internationalization motives, foreign direct investment, networks, and more.

Dunning developed his eclectic paradigm for explaining foreign direct investment
(FDI) choices of production companies. Originally the eclectic paradigm consisted
of firm specific ownership, localization and internalization advantages, also know
as the OLI-model (Dunning, 1988). Later he added motives for FDI. His different
categories of motives are market seeking, resource seeking, efficiency seeking
and strategic resource seeking (Dunning 2000). These categories of motives
constitute the base on which this investigation is built upon.

There has been an increased interest among researchers to study the significance
of business networks (see for example Chen, Chen and Ku, 2004; Harris and
Wheeler, 2005; Lavie, 2006; Yeoh, 2000). Also Dunning (1995) showed a specific
interest in alliance capital as an asset within a network, but not specifically
included this among the categories of internationalization motives. Because of
this we wanted to expand the four dimensions of internationalization motives to
include network seeking motives.

2.1 Foreign Direct Investment

In this paper we investigate motives of internationalisation, where FDI is the
means for achieving internationalization. In the World Investment Report 2006
FDI is defined as an investment made by one actor (known as the foreign direct
investor or the parent enterprise) in an enterprise resident in another economy.
These investments reflect a long term interest, control and relationship between
the two actors. The other enterprise is referred to as the FDI enterprise, affiliate
enterprise or foreign affiliate. To be considered FDI the investor should gain a
significant influence on the management of the foreign affiliate. Sometimes these
investments are divided into inward and outward FDI, meaning going in or out of
the country in focus. FDI can also be divided into three components which are

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equity capital, reinvested earnings and intra-company loans. (World Investment
Report 2006)

2.2 Motives
Dunning (1993) introduced a model of internationalization motives including four
different categories of motives. These categories are market seeking, resource
seeking, efficiency seeking and strategic resource seeking motives. We then
added a fifth category: network seeking motives for recognizing networks as a
significant part of internationalization corresponding to recent research.

Dunning (2000) explains how market and resource seeking motives have been
the two most recognized categories of motives before. These two categories still
correspond to most first time internationalizations by firms. Overall, efficiency
seeking and strategic asset seeking motives increase in significance and are more
common as motives for companies already engaged in multinational activity. He
also shows that closer relations with customers and durable relations with
suppliers were important motives. Furthermore, he suggests that
internationalization was more driven by opportunities rather than threats.

Karagozoglu and Lindell (1998) show that opportunities in foreign markets and
inquiries from foreign buyers were the top two motives for internationalization.
Insufficient domestic sales compared to R&D costs were also a significant motive.

Francis and Collins-Dodd (2000) claim that for high-tech SMEs relationships and
sales contacts in foreign markets are the best way for improving sales abroad.
They also stress the importance of strategic alliances partners in order to
improve foreign market performance. In other words, networking is vital.

Freeman et al. (2006) identify several variables that increase the rate of
internationalization of SMEs. Such variables are a small domestic market, unique
knowledge or technology, and different forms of relationships and alliances.

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2.2.1 Market seekers
This category of motives focuses on demand aspects. If decision makers within a
company acknowledge the importance of accessing specific target markets
abroad and believe that a direct presence internationally is essential for this
access they will focus on market seeking motives. Companies that invest in a
particular country or region with the intention to supply goods and services are
called market seekers. According to Dunning (1993) there are several reasons
why companies undertake such action.

Firms sometimes conduct investments on foreign markets to promote or exploit

new markets. Reasons may include the sheer size of the market or an expected
growth of the same, indicating that the company may enter and then generate
profit.

Products and services may have to be adapted to tastes, needs and trends on a
particular market. A direct presence on a local market may be necessary, as
companies that are not close to markets may have a disadvantage in adapting
services and goods.

Companies may act as a part of a global production and marketing strategy and
seek a physical presence on leading markets where the competitors are.
Companies may follow their competitors, or more aggressively advance in
expanding markets by investing there.

Foreign governments can also encourage investments from companies in other

countries. Incentives such as subsidized labour and trade barriers may tempt
companies to invest in these countries. Much of government export promotion
policies focus on encouraging entrepreneurs to internationalize using business
education and training (Harris & Wheeler 2005). This fosters direct trade links in
other countries, and financial incentives.

Sometimes a firms home market is limited, i.e. by not bringing the firm enough
revenues. Such limitations can be a saturated market, a too competitive market,
not enough customers, and so on. Many companies there go to other markets,
including foreign markets.

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The above situations and motives are part of the category of market seeking
motives by Dunning (1993). In this category he also includes the issue of
following main suppliers or clients abroad in order to retain business. The main
clientele may establish themselves in foreign countries, and following them is
essential for the focal firm. We consider this situation to involve significant
business relationships between the focal firm and the client and therefore placed
it under network seeking motives instead of market seeking motives.

2.2.2 Resource seekers

The resource seeking companies are those investing abroad in order to obtain
resources (Dunning, 1993). Perhaps the wanted resource can be acquired at a
lower comparative cost, or simply does not exist at all in the home country.

Resource seeking could deal with the search for physical resources, such as
minerals (oil, zinc, copper etc.) and agricultural products (rubber, tobacco, sugar
etc.). These resources are sometimes central to the survival of a company,
especially if the material constitutes an important part of the production.

The search for cheap and unskilled (or semi-skilled) labour is an important
activity for many companies trying to minimize costs and maximize profits. This
labour force should be well motivated and exist in large numbers. The seeking for
such labour is often undertaken by manufacturing companies with high real
labour costs.

Sometimes skills and capabilities are resources that can be used through
collaboration with a business partner. According to Dunnings model (1993) this
corresponds to resource seeking. We believe that collaboration involves the use
and development of business relationships and networks. Therefore, we put this
kind of collaboration under the category of network seeking motives.

2.2.3 Efficiency seekers

Another category of motives focuses on efficiency (Dunning, 1993). The purpose
is to rationalize structures of established investments in order to gain from

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common governance. Often those benefits come from economies of scale and
scope, but also risk diversification. Therefore, efficiency seeking is seen as
gaining from the differences of factor endowments, cultures, institutional
arrangements, and economic systems etc. Often this implies concentration of
production in a limited number of places. Companies that are seeking efficiency
are often experienced, large and diversified multinational enterprises.

Advantage can be drawn from differences of factor endowments in different

countries. Such differences consist of availability and cost. As an example, value-
adding activities that are capital, technological or informational intensive are
usually placed in developed countries. On the other hand, value-adding activities
that are labour or resource intensive are often placed in developing countries.

Economies of scale and scope are issues that an efficiency seeker often focuses
on. While differences of factor endowments utilize differences between developed
and developing countries, economies of scale and scope regards differences
within similar countries. The differences may be that of consumer tastes and
supply capabilities.

Companies may become international with the intention to lower the total
amount of tax paid to governments. By acting in several countries the efficiency
seeker might be able to lower the tax burden. Exactly how this is done is not of
interest to this study. However, we believed this was a motive well worth
investigating.

2.2.4 Strategic resource seekers

Strategic resources are intangible resources dealing with the technology and core
competence of the company (Dunning, 1993). Patents, knowledge, the skills of
the employees, and strategic supplies necessary for developing comparative
advantages are examples of strategic resources. By focusing on developing
strategic resources the company supports its long term strategic objectives. This
is often done by acquiring the assets of foreign corporations. Accordingly, the
main motive is therefore to either sustain or strengthen the competitive position,
or weaken the competitors.

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In order for knowledge to have commercial value a company must prevent
competitors from accessing such information (Oviatt and McDougall, 2005).
Secrecy is often the best way of protecting knowledge that has commercial value.
Knowledge based firms therefore protect themselves by the use of patents,
copyrights, and so on. For companies, one way of gaining access to knowledge is
to acquire other firms. Another way is to participate in some form of alliance in
order to benefit from other companies knowledge base. We consider the latter of
these two activities to reflect network seeking.

2.2.5 Network seekers

Networking has been described as a dimension of international entrepreneurial
culture (Dimitratos & Plakoyiannaki, 2003). This network orientation within
companies reflects to what extent companies participate in alliances, cooperative
ventures and other forms of similar social connections.

Networks, relations and collaborations with partners outside the organization can
be very important for companies. By assessing the network seeking motives,
companies intend to nurse, develop and expand their existing networks.
Examples of network relations are personal connections, supplier-customer
relations, contractual cooperation or other types of relations based on mutual
gain and trust.

Chen, Chen and Ku (2004) mention how scholars have recently brought our
attention to relational capital and its importance. The relations between a firm
and its customers, suppliers, partners, government agencies and research
institutions can be included in the term relational capital which represents
goodwill and trust. Investing in relational capital and local linkages enables the
firm to create a competitive advantage.

The relation can be beneficial for several parts of a network. A business network
refers to a set of interdependent business relationships. One can argue that all
firms are a part of a network. Relationships within a network can be short or long
lived as well as being operated at arms length or up close and personal to
facilitate knowledge sharing, innovation and value creation. An investor can
decide to invest in local linkages depending on prior position and experience.

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Sometimes the strategic goals of a company cannot be fulfilled using the existing
network (Chen & Huang, 2004). In such cases the company can develop and
expand the network to include new partners internationally. This process may
differ a lot depending on the nature of the local network and the size of the
entering firm.

Chen et al. (2004) explain two basic principles for network actors to invest in new
relationships. One principle is efficiency, describing how a firm should only
engage in creating new network contact if the connections are not within reach of
the already existing network. According to this principle the diversity of the firms
network is more important than the size of the network. A big network is also
more costly to maintain. Investment in new network relations is legitimate if it
leads to a more diversified network and more opportunities, information or
resources not covered by the domestic network. Also Yeoh (2000) claims that
networks may allow firms to reach information outside the company that they
would not normally access.

Effectiveness is the second network investment principle (Chen et al., 2004). The
effectiveness principle deals with how a network actor can focus on preserving
and enriching the primary existing network relationships. Primary relationships
are essential for the profitability of the focal firm and are more important than
secondary relationships that can only be focused upon after dealing with the
primary ones. Over time the division of what relations are primary and secondary
can change.

According to Harris and Wheeler (2005) the best foundations on which to build an
international strategy are such strong inter-personal relationships. These can
provide and help to develop knowledge, understanding, visions, and plans for the
internationalization of the firms. Further, through cooperative arrangements,
these relationships can provide the means and mechanisms by which these plans
may be realized. Additionally, Kingsley & Malecki (2004) stresses the importance
of informal networks in the case of SMEs.

Lavie (2006) emphasises how resources can be shared through alliances and
networks. Lavie explains how creating a competitive advantage using the

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network requires the development of external links. The joint resources can
accomplish a synergy which means a total that is worth more than the parts
individually.

There were also motives within the previous sections that we considered as
network motives. One was following main suppliers or clients abroad in order to
retain business (mentioned in section 2.2.1), and the other was starting a new
collaboration (mentioned in section 2.2.2).

To conclude, research shows that networks are of great importance for

companies. We therefore believe that the fifth category of motives describing
network seekers is justified.

2.3 Concluding the motives

Five groups of motives or drivers have been presented in the just as many
sections above. The first four are Dunnings (1993) original and the fifth are
added by us. It is at this point possible to make guesses of the outcome of this
study. The motives we believe will not show up as important are efficiency
seeking and strategic resource seeking motives. Efficiency seeking is mainly
conducted by larger and already internationalized firms, and therefore we do not
expect smaller companies to recognize this as important. Strategic resource
seeking probably requires financial assets to acquire whole or parts of firms, and
smaller companies may lack those funds.

We are not sure about how resource seeking motives will be perceived. Materials
and such should not be a major problem for a small and young firm with no or
little production. However, high tech companies may be depending on rare or
expensive materials. Therefore, we dare not make any guesses at this point.

Small firms may be eager to generate income, and therefore we believe market
seeking motives to be important. We also believe that network seeking motives
will recognized as an important category, and we find strong support from
previous research presented in section 2.3.5.

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3 HOW THE SURVEY WAS CONDUCTED

The intention of this chapter is to show how the investigation was carried out.
The aim is to illuminate the process of how companies were chosen, and how the
data was collected and analyzed.

3.1 A quantitative approach

The purpose of this study is to investigate motives of internationalization
amongst companies that are members of business incubators and science parks,
and this implies a so called quantitative approach for several reasons. First, we
wanted to examine a common set of variables (i.e. motives) in a standardized
manner. Second, a web based questionnaire used in this study gave us the
opportunity to reach more companies than a qualitative approach would allow us
to. Third, one strength of a quantitative approach is the possibility to statistically
generalize the results (Holme & Solvang, 1997). We saw, at this point, no reason
for doing a deeper study since we wanted to create a general picture of how
small and newly started companies rate motives for internationalization.

The alternative way of conducting our research would be to investigate a smaller

number of companies. By doing so, the result could have been a more in-depth
picture of the motives behind internationalization. However, in that case, we do
not believe we would have been able to generalize the results for the target
group of companies.

3.2 Choosing the companies

As the aim of this study was to investigate motives for internationalization in
small companies that are members of the so called incubators and science parks,
we turned to SISP (Swedish Incubators and Science Parks). SISP is an
organization for incubators and science parks in Sweden. By the year 2006, SISP
had more than 40 members, consisting of incubators and science parks.

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According to SISP, there were nine incubators and science parks that were
suitable for the survey (see appendix C). After an initial contact by phone, an e-
mail was sent out to a key person representing each of these nine members. The
e-mail, including the preceding letter as well as a link to the web based
questionnaire, was then forwarded to the companies. Later on, the reminders (as
described in section 3.3) were sent out to the same key persons.

We believe that by using key persons as contacts, our e-mails reached a suitable
person in each company. Also, companies might be more willing to participate
when being contacted by people they probably know personally, instead of being
contacted by us. The contact persons are also likely to have proper e-mail
addresses to people within the companies, rather than a general address (for
example, info@company.com).

3.2.1 Incubators and Science Parks

The small and young firms that participated in this study are members of
business incubators and science parks. For example, business incubators offer
assistance and support. The concept and support functions that are offered to
newly started companies vary between different incubators. Common support
functions are: helping the entrepreneurs to avoid common obstacles that could
lead to failure, developing the ability of the entrepreneur to run a business, and
guiding to external financing. The incubator is a tool for developing new strong
businesses and indirectly leads to increased employment and welfare. (SISP,
2006b)

A science park is a meeting ground for people, ideas, knowledge and creativity
with the purpose of stimulating and developing companies. Sometimes a science
park is also referred to as a technology or research park. These science parks
often collaborate closely with universities. Here, companies that are based on
research and technology from the university have the potential of growing. The
companies in the park have access to a creative and developing environment,
office space, administration and office machines. Many science parks also offer
advice and counseling within fields that entrepreneurs often lack experience of.
Such fields could be for example business development, finance and access or
expansion to the international market. (SISP, 2006c)

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Swedish Incubators and Science Parks (SISP) is an organization that each year
collects performance statistics from its members. Statistics typically include the
number of new start up companies, the number of new employees for the
companies and the total amount of taxes generated in terms of tax on
employment, tax on profit, sales tax and social fees. (SISP, 2006d)

Incubators and science parks are examples of measures taken in Sweden for
increased economic growth. They are needed because many promising
companies fail before being able to fully develop their operations. Reasons for
such failures are the lack of capital at an early stage of development, lack of
knowledge within other fields in addition to technology, and finally ambitious
entrepreneurs who can manage the transition from an idea to a profitable
company. Thus, the assistance offered by incubators and science parks could
very well be the difference between success and failure. (SISP, 2006e)

The purpose of SISPs operations is to act in the interest of its members including
both incubators and science parks. A main focus of SISP is the active sharing of
knowledge and cooperation among the members and other partners within the
network, both nationally and internationally. SISP is a coordinator for its
members but is also working for the creation of new incubators and science
parks, as well as new experience for young professionals. The operations of the
members have lead to the starting of 2200 entrepreneurial companies and
35 000 new jobs. In addition to these jobs the companies have increased the
business of numerous accountants, lawyers, suppliers and real estate dealers.
Many of the companies are already profitable and many more are expected to
present a profit in a near future. (SISP, 2006e)

3.3 Collecting data using a questionnaire

In this study, data was collected by the use of a questionnaire (the questionnaire
is described in section 3.6, and can be found in appendix A). Our intention was to
keep the questionnaire simple and short, since a complicated questionnaire could
lower the response rate. Our aim was also to reduce the number of leading and

14
emotionally charged questions to a minimum. By keeping a certain structure to
the questionnaire, we believe the answering process would be easier.

One advantage of a questionnaire is that a high level of anonymity can be

achieved. Another advantage is that the respondents are not influenced by an
interviewer the questions in the survey are presented similarly to all
respondents. The drawbacks mostly consist of a lower response rate, and that it
cannot be guaranteed that the questionnaire is filled in by an appropriate person.
Another thing is that if the respondents do not understand a question or a
motive, we are unable to explain it further. This was because we did not interact
directly with the respondents. Therefore, we put effort in expressing ourselves as
clearly as possible.

We saw no benefit for this survey in exposing the opinions of any specific person
or company. Therefore, no effort was made in encouraging the respondents to
reveal the name of his or her company. Also, we believe this anonymity affects
the response rate in a positive way. Even if neither the questions nor the
intentions of this study were to reveal any sensitive, or perhaps secret,
information connected to the participating companies, the answers from the
survey were treated anonymously. In other words, no answers can be linked to a
specific person or company.

The questionnaire used in this study was published on the Internet. The reason
for this is that it meant lower costs compared to sending the questions with
ordinary mail. Also, distribution of the questionnaire is faster and a large target
population can easily be accessed. Furthermore, responses are quickly received
in comparison to ordinary mail.

A questionnaire should come with a preceding letter that enlightens the

respondents of the study and its purpose (Eriksson & Wiedersheim-Paul, 1999).
As the survey was conducted on the Internet, the letter was sent out by e-mail to
the companies participating in the study. Apart from introducing the authors of
this paper, the letter also contained the link that directed the respondents to the
web-based questionnaire. The preceding letter is located in appendix B.

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As response rates often are low when using questionnaires (Eriksson &
Wiedersheim-Paul, 1999), the aim was to reach as many suitable companies as
possible. Therefore, to increase the response rate, reminders were sent out.
Fortunately, it worked since the response rate almost doubled compared to when
only the initial letter was sent out. Please note that both the letter and the
questionnaire were presented to the companies in Swedish (in the appendices,
they have both been translated into English).

Out of 150 small companies in incubators and science parks we received 20

answers. This means a response rate of slightly above 13 percent if we assume
that all potential companies have been contacted. A list of how many companies
that (at most) were contacted is located in appendix C.

3.4 Construction of the questionnaire

The questionnaire mainly consisted of closed questions, meaning that the
respondents had to choose from a certain number of alternatives (section one
and two in table 1). The two exceptions, where free text could be entered, were
categories three and four (see table 1). Category three consisted of a free text
area where the respondents unrestrictedly could enter additional motives,
thoughts, opinions and beliefs. Category four consisted of an e-mail text area
where the respondents could enter an e-mail address to which our final report
could be sent, later on.

Section 1: Control variables, characteristics of the

companies.
Section 2: Rating of motives for internationalization.
Section 3: Free text area, where companies could enter
additional motives and other points of view.
Section 4: E-mail to which the completed study could be
sent.
Table 1: The questionnaire and its sections.

16
3.4.1 Section 1 control variables (questions 1 to 4)
The first part of the questionnaire consisted of questions regarding company size
(number of employees), business sector according to Global Industry
Classification Standard (GICS), business function and finally ownership modes.
These questions had two main purposes. The first was to make sure the
companies were valid for this survey, for example ensuring the size of the
companies by asking about the number of employees. The second purpose was
to see what kind of companies that actually responded to the questionnaire.

3.4.2 Section 2 motives of internationalization (question 5)

In this section companies were asked to grade motives. In total, 28 motives were
presented in the questionnaire. Participating companies were then asked to grade
the motives. Eight motives in the survey we believe indicated market seeking
(MS1-MS8 in appendix D, question 5), for example securing/developing existing
markets or market shares and exploit or enter new markets.

Five motives in the questionnaire concerned resource seeking (RS1-RS5). Two of

the resource seeking motives are based on Dunning (1993) (RS1 and RS2),
dealing with natural resources and cheap labor. We added three additional
motives that we considered being resource seeking motives too. Infrastructure
and supply of water and energy are physical entities that may influence a
companys willingness to engage in FDI. Institutional and legal framework is not
physical, but still a country specific property. That is the reason for including it in
this section.

The category of Efficiency seeking motives (ES1-ES5) was more difficult to

construct and operationalize. This is mainly because the theory aims towards
companies that are already represented in more than one country. As
rationalizing activities are mostly undertaken by enterprises already
internationalized, we had to shape the motives in a way that they could be
graded by the firms we wanted to investigate since many of them were expected
to have domestic operations only at this point in time. Our solution was to ask if
efficiency could be accomplished in the future, hence the words [] opportunity
to later [] (please refer to appendix D for full text motives in English).

17
Five motives handled strategic resource seeking activities (SRS1-SRS5). The first
four were perceived as congruent with theory (Dunning, 1993), but the last one
of these five motives regarded skilled labor. We thought of highly educated
personnel as an important strategic factor for companies, justifying this motive
within the category of strategic resource seeking motives.

In the questionnaire, five motives captured network seeking (NS1-NS5). These

motives were derived from Dunning (1993), Yeoh (2000), Chen et al. (2004),
Chen and Huang (2004), Lavie (2006) etc. Examples of these motives are
increased possibility to gain technology, management/marketing expertise, and
or organizational skills and being able to follow or stay close to main
clients/suppliers.

3.4.3 Section 3 free text area (question 6)

Following the motives mentioned above, participating companies were given the
chance to enter additional motives in a text area. The reason for this was the
possibility that there were other existing and important motives experienced by
the firms that werent represented in the questionnaire. The free text area
allowed participating firms to enter any ideas, beliefs etc.

3.4.4 Section 4 e-mail (question 7)

Companies participating in the survey were given the possibility to enter an e-
mail address in case they wanted to receive our final report. We could then send
it to show our appreciation. It also meant that a certain response could be related
to a certain company (in cases where e-mail addresses were entered). Such
connections are not presented in this paper as anonymity was promised.

3.5 Is the survey valid and reliable?

One of the concerns following a low response rate is the generalization of the
results for the entire target population. Another issue is that the non-responders
may have certain characteristics compared to the responders. We have no

18
information on the non-responding companies. Therefore we are not able to
compare whether our respondents significantly differ from the target population.
One should therefore keep these issues in mind when generalizing the results.

We believe that the collected data comes from reliable sources, i.e. persons
within the company. Since the data was collected using a questionnaire we were
also able to minimize the so called interviewer effect since we had no direct
contact with the respondents. Additionally, as the study regarded small and
young companies, we believe that the responses were less influenced by
company policies compared to answers from larger firms. These often have
policies and guidelines from top management that may influence the responding
person to reply according to the official opinion.

One problem with quantitative methods is to obtain valid information (Holme &
Solvang, 1999). In the questionnaire, the companies are asked to grade motives.
The motives in the first four categories were based on the work of Dunning
(1993). The network motives were based both on Dunning and network research
(as described in 2.2.5). However, we cannot be sure that we did not miss any
important motive, and therefore gave the companies the opportunity to enter
additional motives.

3.6 Analyzing the data

The questionnaire contained questions to measure how the companies rated
internationalization motives, but also questions on control variables concerning
the characteristics of the companies themselves. Besides giving us the possibility
to ensure that the companies were small (less than 50 employees), the control
variables provided information about what kind of firms actually responded to the
survey.

The most important part of the questionnaire, however, was the grading of the
motives for internationalization. The companies were asked to grade these
motives on a five-point Likert-scale. The scale started with not important
(response alternative 1) and ended with very important (response alternative
5). The responses were analyzed for both single motives and groups of motives.

19
We focused on alternatives 4 and 5 (indicating high importance for a motive). For
each motive, all responses with a 4 or 5 rating on the Likert-scale were added
and then divided by the total number of responses for that motive. This resulted
in a percentage of the responders who considered the motive to be important or
very important. This is called the positive answering ratio.

The results were also analyzed and compared for the five groups of motives. The
positive answers (4 or 5) within each group were summarized and divided by the
total number of answers for that group. This gives us a positive answering ratio
for the whole group. The results of the responses for individual motives and
groups of motives are displayed in chapter 4 (graphs 1, 2, 3 and 4).

20
4 RESULTS FROM THE QUESTIONNAIRE

In this chapter, the results of this paper the reader is presented to the reader.
The intention is to show main patterns from the questionnaire. The complete
results are found in appendix D.

4.1 Control variables

The first part of the questionnaire consisted of control variables. First, the
companies were asked about their number of employees. The results show that
almost half of the companies have one to four employees. On second place we
find five to nine employees. Most important though, we find that all of the
respondents can be considered as small since none of them have more than 19
employees.

More than one third of the companies (35 percent) are found in the information
technology business sector. They are followed by the industrial sector where one
fourth of the companies belong.

Most of the companies (85 percent) have domestic sales and 45 percent have at
least one economic function abroad (sales, distribution, or marketing). Ten
percent of the companies have exported. Additionally, few companies have
foreign production or R&D only ten percent and five percent, respectively.

Only seven companies responded to the part where they were asked about
ownership modes. However, 25 percent have a contract or strategic alliance.

4.2 Single motives

If we consider single motives only, there are four that draw attention in terms of
importance (as perceived by the participating companies). The first two are found
within market seeking; exploiting or entering new markets and a limited home

21
market. Both are perceived as important or very important by more than 80
percent of the responding companies. The other two are found within network
seeking motives; being close to main client or suppliers and developing new
collaborations. The former are perceived as important or very important by more
than 80 percent of the respondents, and the latter by more than 70 percent.

A fifth motive that was recognized as important or very important by more 60

percent is securing or developing existing markets or market shares.

There are two motives that were not perceived as important at all; host country
encourages investments (market seeking motives) and host country offers better
infrastructure (resource seeking motive).

In graph 1 we show how the single motives were graded, i.e. the fraction of
positive responses for each motive in percent. Positive answers correspond to
important or very important on the 5-point Likert-scale. The motives in full text
are found in appendix D.

100
90
80
70
percentage

60
50
40
30
20
10
0
Market Resource Efficiency Strategic Network
seeking seeking seeking resource seeking
(MS1 - MS8) (RS1 - RS5) (ES1 - ES5) seeking (NS1 - NS5)
(SR1 - SR5)

Graph 1: Results from the questionnaire. The bars show percentage of

respondents that perceived motives as important or very important (4 and 5 on
the Likert-scale, respectively). Each bar represents one motive.

It is possible to calculate how the single motives scored in average, i.e. taking
the entire Likert-scale in account (response alternatives 1 to 5). This is shown in

22
graph 2. Motives with fewer scores 4 or 5 on the Likert-scale will seem more
important. For example, this is the case for resource seeking motives. With few
scores on 4 and 5 theres almost no importance at all according to graph 1. In
graph 2, resource seeking motives have better scores. However, it is important to
remember that response alternatives 1 to 3 do not ascribe importance to the
motives. We do not investigate the average scores further, but instead focus on
the results shown in graph 1.

5
Response alternatives

1
Market Resource Efficiency Strategic Network
seeking seeking seeking (ES1 resource seeking (NS1
(MS1 - MS8) (RS1 - RS5) - ES5) seeking - NS5)
(SR1 - SR5)

Graph 2: Average response scores for single motives.

4.3 Groups of motives

When it comes to bundled motives, there are two categories that stand out from
the crowd; market seeking and network seeking motives. More than 50 percent
of the responses indicate the network seeking motives, as one group, as being
important or very important. Just about 40 percent indicate market seeking
motive as important or very important.

Efficiency seeking and strategic resource seeking motives received lower scores;
only 19 and 16 percent, respectively, of the responses ascribe the grouped
motives any importance.

23
Resource seeking motives as a group are ranked lowest among the participating
companies; about 4 percent of the responses ascribed this group any importance.

100
90
80
70
percentage

60
50
40
30
20
10
0
Market Resource Efficiency Strategic Network
seeking seeking seeking resource seeking
(MS1 - MS8) (RS1 - RS5) (ES1 - ES5) seeking (NS1 - NS5)
(SR1 - SR5)

Graph 3: Weighted results from the questionnaire. The bars show percentage of
respondents that perceived motives as important or very important.

The average scores for the grouped motive are shown in graph 4. As with single
motives, we will not focus on the average scores for grouped motives.

5
response alternatives

1
Market Resource Efficiency Strategic Network
seeking seeking seeking (ES1 resource seeking (NS1
(MS1 - MS8) (RS1 - RS5) - ES5) seeking - NS5)
(SR1 - SR5)

Graph 4: Average response scores for weighted results from the questionnaire.

24
4.4 Additional motives and taking part in the final report
In the two last sections questionnaire, there was a free text area into where
companies could enter additional motives. No company did so. However, seven
companies wanted to receive our final report.

25
5 INTERPRETATION AND DISCUSSION

In this chapter the results are examined and analysed. First, we remind the
reader of the result and the possible explanations of the results are presented.

The four single motives that received the highest scores are found in market
seeking and network seeking. Entering new markets and a limited market in the
home country are perceived by the companies as two primary drivers when
internationalizing. Instead of adapting products, gain a first movers advantage,
and encouragements by host countries etc. it is new markets that the companies
focus on. For younger and smaller companies, gaining access to markets and
generating revenues may be crucial when funds are scarce. One way of doing so
is to look at foreign markets, especially when the home market brings small
chances for success.

The other two primary single drivers are found in network seeking. Staying close
to main clients and/or suppliers as well as starting new collaboration seems to be
of high interest. There are several reasons for this. First, as seen in section 4.1,
remaining close to an important client or supplier is one important factor. For
small companies, the main client may be the only client and hence vital for
generating revenues. Second, companies may also be aware of the advantages of
a large network and seek to expand it in other countries.

Most notable, for the grouped motives, are the importance ascribed to network
seeking and market seeking. Both receive well above one third positive
responses. We believe that this more than enough to be neglected. Thus, this
confirms our belief that networks are important.

The participating companies recognition of network motives as a group supports

the advocates of network theory (see section 2.3.5 for some of them). This
indicates that networks are important drivers to internationalize for companies in
incubators and science parks.

26
The fact that the market seeking motives attracted many positive response
answers was not unexpected. High levels of revenue and market demand are
prerequisites for making profits and battle with competitors on the global
business arena. 80% of the respondents found a limited home market being an
important driver of internationalization. Sweden is a highly developed but very
small country. Therefore it is not unlikely that many small companies, in the
future, will establish themselves in foreign countries in order to access potentially
bigger and more lucrative markets. Especially if the companies focus on a niche
market it is quite possible that the number of potential customers and clients in
Sweden is not sufficient for the company to make a significant profit.

Efficiency and strategic resource seeking motives can not be regarded as

important, according to the results. We believe this is due to the early stage
business development of the companies within the survey. Low scores on
efficiency seeking motives can be explained by that mostly large and already
internationalized companies undertake rationalizing activities. Smaller firms
simply have not established structures large enough to allow such rationalization.
According to theory it is unusual that efficiency seeking is the main driver for
initial internationalization. Regarding the scores for strategic resource seeking
motives, such activities can be very capital intense. Therefore, small companies
avoid acquiring other firms or parts of firms due to their lack of capital.

Resource seeking motives are recognized as important or very important by

about 4 percent of the participating companies. One possible reason is that at an
early state, materials are only needed in smaller quantities by our sample
companies. Also, when it comes to infrastructure, energy, and legal framework,
such things may be similar to home country. Remember, small firms often
engage in FDI in already developed countries and therefore such issues are of
less importance. In addition to this, the companies within our study dont seem
to rank unskilled labour as important. This comes as no surprise as such motives
can be expected to be of importance in larger companies, such as textile
manufacturers. One must remember that all of this depends on type op
operations. A company that supply services instead of physical products will not
depend much on materials and, additionally, will not benefit from cheap
workforce on another location. Often, service cannot be produced in one place

27
and used in another. There are exceptions where technologies, such as
telecommunication and Internet, have come to play an important role.

Looking back at our suggestions in section 2.5, the findings of this paper are
pretty much in line with our expectations. For both single motives and groups of
motives, it seems that the companies are network and market seekers. One the
other hand, strategic resource and efficiency seeking motives both received
moderate scores. Even though we wouldnt make any initial guesses for resource
seeking, we are surprised to find that this category received such low scores.

28
6 CONCLUSIONS

In this chapter we conclude our findings and discuss them. Other areas where
further research may be conducted are also suggested.

As we have seen, the companies participating in this study can mainly be

regarded as market seekers and network seekers. Both single motives and
groups of motives indicate this. Again, according to the results, the importance of
networks is shown. As seen in the theoretical section and elsewhere the network
perspective of organizations is gaining ground in academic business research (see
also section 2.2.5).

Based on the result and analysis we believe that detaching network motives,
adding additional network motives and bundling them to an individual group was
justified. For a small and newly started firm the existing network may be limited.
This makes primary relationships even more important. One network partner
could potentially make the whole difference between success and failure for the
small firm.

Our findings also indicate that the respondents in this study are not efficiency,
resource, nor strategic resource seekers.

6.1 Limitations
The drawback of this study is the low number of participating companies, 20 in
total. This may not be sufficient to generalize our findings in this paper to all
companies in business incubators and science parks. However, this paper points
out the direction and may act as an indicator to how these companies perceive
motives of internationalization. Thus, we believe that our findings are useful to
better understand the driving forces of internationalization of small and young
companies.

29
6.2 Who may benefit from this study?
We believe that incubators and science parks can benefit from the findings of this
paper. First, it seems reasonable that a small and young firm is eager to generate
sales in order to grow to a more steady state. Second, our research indicates that
networks are important early in the process of business development. Incubators
and science parks are great places for networking activities, and by their sheer
existence constitute an advantage for the member companies.

By using the results of this paper, the management of incubators and science
parks could tailor their support activities and programs. When the small and
young firms enter a state of growth, market and network issues should be
emphasized. Today, many incubators and science parks have support functions
for internationalization. For example, business incubators provide seminars and
courses where these subjects can be discussed. The member companies can then
learn more about how to enter foreign markets, or develop business networks. If
the programs include support functions dealing with issues of market, resource,
efficiency, strategic resource and network seeking a focus should be on the
market and network seeking as pointed out by our results. This is not necessarily
true in each specific case, but the focus on these two areas should help
incubators and science parks to aim at the more important issues.

6.3 Future research

In order to test whether our results are replicable, future surveys and research
could include similar questionnaires but use a more extensive set of sample
companies. The surveyor could also contact the selected companies directly by
phone or email to hopefully accomplish a better response rate than we did. A
similar result with more responses and higher response rate would make
recommendations to incubators and science parks much more reliable.

In our opinion, network seeking motives should be kept as a separate category

and investigated more closely. We believe that our findings reflect the importance
of networks as motives of internationalization. Simultaneously, our results point
out some network seeking motives to be very important whereas some seem to
have no importance at all. Perhaps, future investigators can point out additional

30
network issues that are important to young and small firms and how network
partners can support an internationalization process.

31
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Appendix A Questionnaire

Webbenkt
Motiv fr utlandsetablering

Tack fr att ni tar er tid att fylla i detta formulr.

Svaren behandlas konfidentiellt och ingen information kommer att kunna kopplas
till ngot enskilt fretag i studien.

1. Antal anstllda:

1-4

5-9

10 - 19

20 - 49

50

2. Sektor, huvudsaklig verksamhet (enligt Global Industry

Classification Standard - vlj det som passar bst):

Energi

Material

Industrivaror- och tjnster

Sllankpsvaror- och tjnster

Dagligvaror

Hlsovrd

Finans och fastighet

IT

Telekom

Kraftfrsrjning

36
3. Fyll i vilka/vilken av fljande affrsfunktioner ert fretag har
(mjligt att vlja flera):

Frsljning inom Sverige

Export

Frsljning/distribution/marknadsfring utomlands

Produktion utomlands

Forskning och utveckling utomlands

4. Om ert fretag har direkt nrvaro utomlands s r gandeformen

(mjligt att vlja flera):

Helgt dotterbolag

Majoritetsgt dotterbolag

50/50 eller minoritetsgt dotterbolag

Kontrakt eller strategisk allians

Franchising

Licensiering

5. Tag stllning till fljande motiv och deras betydelse fr en planerad

eller genomfrd utlandsetablering (d.v.s. inte enbart export) av ert
fretag.

Mycket Varken Mycket

Liten Stor
liten stor eller stor
betydelse betydelse
betydelse liten betydelse
1. Skra/utveckla existerande
marknader/marknadsandelar
2. Exploatera eller trda in p nya
marknader
3. Bttre kunna anpassa produkter till
behov/trender p utlndska
marknader genom att fysisk befinna
sig p dessa
4. Erhlla "first mover advantage"
5. Nrvaro p den lokala marknaden
minskar transaktions/transport/
produktionskostnader.

37
6. Vrdlandets myndigheter frmjar
utlndska investeringar
7. Undvika kvoter,tullar och/eller
andra, liknande handelshinder i
vrdlandet
8. Bttre tillgng till naturresurser i
vrdlandet
9. Bttre tillgng p billig och/eller
lgutbildad arbetskraft i vrdlandet
10. Bttre infrastruktur i vrdlandet
11. Bttre energi- och vattentillfrsel i
vrdlandet
12. Bttre passande institutionell och
juridisk struktur fr fretagande i
vrdlandet
13. Mjligheter att senare utnyttja
skillnader i tillgng och kostnad fr
arbete, resurser osv. mellan olika
lnder
14. Mjligheter att senare utnyttja
skillnader i konsumtionsvanor mellan
olika lnder
15. Mjligheten att senare kunna ka
effektiviteten inom verksamheten
genom att flytta resurser p grund av
skillnader och skiftningar i efterfrgan
16. Mjligheten att senare kunna
utnyttja skalfrdelar
17. Genom frvrv av hela eller delar
av ett utlndskt fretag skaffa
marknadskunskap om frmmande
marknader
18. Genom frvrv av hela eller delar
av utlndskt fretag skaffa teknisk
kompetens (patent, anstlldas
kunskap, framgngsrika system etc.)
19. Genom frvrv av hela eller delar
av ett utlndskt fretag minska
konkurrensen
20. Genom frvrv av hela eller delar
av ett utlndskt fretag hindra
konkurrenter frn att kpa upp det
andra fretaget
21. Bttre n vlutbildad personal
22. kade mjligheter att genom
samarbete skaffa teknologisk
frmga,
management/marknadsfringsexpertis

38
och/eller organisatorisk kunskap
23. Bttre mjligheter att befinna sig
nra huvudklienter/kunder
24. Bttre nyttja en partners resurser

25. Kunna utnyttja klustereffekter

26. Inleda nya samarbeten

27. Hemmamarknaden r fr
begrnsad
28. Mjligheter att snka totala
skattebrda genom att befinna sig i
flera lnder
Mycket Varken Mycket
Liten Stor
liten stor eller stor
betydelse betydelse
betydelse liten betydelse

6. r det ngot ni anser att vi glmt frga om? r s fallet fr ni grna

delge oss detta nedan.

7. Vill ni ta del av resultatet? Fyll d i en e-postaddress i fltet som det

frdiga arbetet kan sndas till!

Nr du besvarat frgorna ovan r det dags att snda in formulret. Det gr du

genom att trycka p knappen nedan.

Skicka svar!

39
Appendix B Preceding Letter

Idag vljer mnga fretag att etablera sig utomlands.

Vi r tv studenter vid Uppsala universitet som skriver en D-uppsats

om motiv fr att bli ett multinationellt fretag. Vi vill underska dessa
motiv och se vad som r viktigast fr nystartade, innovativa fretag i
inkubatorer och science parks.

Naturligtvis kommer svaren behandlas anonymt i studien och namn

behver inte anges. Det borde bara ta ngra f minuter att fylla i
enkten och ni kommer t den genom att klicka p lnken nedan.

http://home.student.uu.se/k/kihe5457/enkat/

Om ni som mottagare av detta brev anser att det finns en person inom
fretaget som r mer lmpad att besvara formulret s fr ni grna
vidarebefordra brevet.

Om ni skulle vilja ha en kopia av det frdiga resultatet av studien finns

det mjlighet att ange en e-postadress i slutet av enkten.

Skulle det vara ngot som ni undrar ver s kontakta grna oss p
anders.hansson.9073@student.uu.se.

Tack p frhand!

Anders Hansson och Kim Hedin

Uppsala 27 November 2006

40
Appendix C Participating incubators and science parks

Business incubator or Number of member

Science park companies
Mjrdevi Business Incubator 15
Chalmers Innovation 17
Jnkping Science Park 17
Videum 5
Ideon Innovation Centre 14
STING 15
UIC 20
Uminova Innovation AB 34
Aurorum 13
Total number of companies: 150

41
Appendix D responses

Question 1 number of employees

Number of Number of Percentage of

Employees companies companies

0 2 10%
14 9 45%
59 7 35%
10 19 2 10%
20 49 0 0%
50 0 0%

Question 2 business sector

Business sector Number of Percentage of

companies companies

Energy 1 5%
Materials 2 10%
Industrials 5 25%
Consumer discretionary 3 15%
Consumer staples 0 0%
Health care 2 10%
Financials 0 0%
Information technology 7 35%
Telecommunications services 0 0%
Utilities 0 0%

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Question 3 business functions

Business functions Number of Percentage of

companies companies

Domestic sales 17 85%

Exporting 7 10%
Foreign sale/distribution/marketing 9 45%
Foreign production 2 10%
Foreign R&D 1 5%

Question 4 ownership modes

Ownership modes Number of Percentage of

companies companies

Wholly owned subsidiary 0 0%

Majority owned subsidiary 0 0%
50/50 or minority owned subsidiary 0 0%
Contract or strategic alliance 5 25%
Franchising 1 5%
Licensing 1 5%

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Question 5 motives

Motives Response alternatives

1 2 3 4 5

Market seeking motives

MS1: Securing/developing existing markets or 1 0 7 7 5

market shares
MS2: Exploit or enter new markets 0 1 2 6 10

MS3: Better adapt products to products to foreign 0 3 11 4 0

markets by physical presence
MS4: Gain first mover advantage 1 3 8 6 0

MS5: Reducing transaction/transportation/ 4 3 7 5 0

production costs by presence on thelocal market
MS6: Host country encourages FDI 6 4 9 0 0

MS7: Avoiding quotas, customs or other trade 8 3 4 4 0

barriers in home country
MS8: Limited home market 0 0 3 4 12

Resource seeking motives

RS1: Better access to natural resources in host 13 2 3 1 0

country
RS2: Better access to cheap and/or unskilled labour 9 5 4 1 0
in host country
RS3: Better infrastructure in host country 13 4 2 0 0

RS4: Better energy and water supply in host country 14 2 2 1 0

RS5: More suitable institutional and legal framework 6 4 8 1 0

in host country

Efficiency seeking motives

ES1: Possibility to later gain from differences in 5 7 3 4 0

supply and costs for labour, resources etc. between
countries
ES2: Possibility to later gain from differences in 6 6 3 2 2
consumer patterns between countries
ES3: Possibility to later rationalize by moving 6 4 4 5 0
resources due to shift in demand between countries
ES4: Possibility to later benefit from economy of 4 4 8 2 1
scale and scope
ES5: Possibility to lower the total tax burden by 5 9 2 1 2
being in more than one country

44
Note: 1 = not important, 2 = little important, 3 = neither, 4 = important, 5 = very important

Motives Response alternatives

1 2 3 4 5

Strategic resource seeking motives

SR1: Acquiring a whole or part of another company 4 6 4 4 1

to gain knowledge about foreign markets
SR2: Acquiring a whole or part of another company 3 5 6 2 2
to gain technological knowledge (patents, employee
skills, systems etc).
SR3: Acquiring a whole or part of another company 7 5 4 2 0
to reduce competition
SR4: Acquiring a whole or part of another company 6 6 5 2 0
to prevent competitors to acquire that company
SR5: Better access to skilled and educated labour 1 6 8 1 2

Network seeking motives

NS1: Increased possibility to gain technology, 1 4 7 5 3

management/marketing expertise, and or
organisational skills.
NS2: Being able to follow or stay close to main 1 2 0 7 9
clients/suppliers
NS3: Better use a partners resources 0 3 7 7 0

NS4: Use cluster effects 3 1 8 4 3

NS5: Start new collaborations 0 1 4 13 2

Note: 1 = not important, 2 = little important, 3 = neither, 4 = important, 5 = very important

Question 6 & 7
No company entered additional motives or other comments. Seven companies
entered e-mail addresses, but we do not list them here in order to preserve
anonymity.

45